United States of America v. David E. Napier

Filed November 30, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 01-1698
UNITED STATES OF AMERICA
v.
DAVID E. NAPIER,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D. C. Crim. No. 97-cr-00214)
District Judge: Hon. James McGirr Kelly
Submitted Under Third Circuit LAR 34.1(a)
November 1, 2001
Before: SLOVITER, NYGAARD, and CUDAHY, *
Circuit Judges
(Filed: November 30, 2001)
Howard J. Bashman, Esq.
Thomas P. Manning, Esq.
Buchanan Ingersoll
Philadelphia, PA 19l03
Attorneys for Appellant
_________________________________________________________________
* Hon. Richard D. Cudahy, United States Court of Appeals for the
Seventh Circuit, sitting by designation.

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Anita D. Eve, Esq.
Assistant U.S. Attorney
Michael L. Levy, Esq.
United States Attorney
Robert A. Zauzmer, Esq.
Assistant United States Attorney
Chief of Appeals
Office of United States Attorney
Philadelphia, PA 19l06
Attorneys for Appellee
OPINION OF THE COURT
SLOVITER, Circuit Judge:
David E. Napier appeals from a judgment of sentence
pursuant to U.S.S.G. § 2F1.1. Napier, who was indicted in
the United States District Court for the Eastern District of
Pennsylvania, pleaded guilty to four counts of bank fraud
in violation of 18 U.S.C. § 1344. The sentence was appealed
to this court and remanded to the District Court for re-
sentencing. Napier now appeals the re-sentence. Napier
argues that the District Court erred in interpreting this
court' s mandate on remand by failing to reduce the loss
calculation by the appraised value of the property pledged
to secure the loan. He also contends that the District Court
erred in imposing accrued but unpaid interest in its
recalculation of the fraud loss amount. Furthermore, Napier
argues that the District Court erred in finding that Great
Western Bank ("GWB") suffered a loss as it is, he contends,
conclusively presumed to have sustained no loss under
state law.
I.
In June of 1990, Napier borrowed approximately
$384,000 from GWB to fund his purchase of property
located in Bucks County, Pennsylvania. As part of the loan
application, GWB had a licensed real estate appraiser
prepare an appraisal valuation of the property Napier
planned to purchase. The lender' s appraisal valued the
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property at $480,000. After making only five payments,
Napier defaulted on the loan and in January of 1991, GWB
began foreclosure proceedings. The property was purchased
at a sheriff ' s sale in April of 1995 by GWB, the sole bidder,
for $305,000. In October of 1997, Napier pleaded guilty to
four counts of bank fraud in violation of 18 U.S.C. § 1344.
U.S.S.G. § 2F1. 1 provides a base offense level of six for
fraud. It further provides offense level enhancements given
in proportion to the magnitude of the "loss."" Loss" is
defined as the "amount of the loan not repaid at the time
the offense is discovered, reduced by the amount the
lending institution has recovered (or can expect to recover)
from any assets pledged to secure the loan." 18 U.S.C.
§ 2F1. 1, cmt. n.8(b). At Napier' s original sentencing hearing,
the District Court based its determination of GWB' s"loss"
on the forced sale price, $305,000, finding that his total
offense level was sixteen and that he was subject to a
sentencing range between twenty-seven and thirty-three
months imprisonment. The District Court sentenced Napier
to a term of thirty months imprisonment, five years
supervised release, ordered him to pay a special
assessment of $200, and restitution totaling $16,000
($14,000 to GWB and $2,000 to another lender for a
fraudulent car loan).
He appealed from the judgment of sentence. This court
remanded the case to allow the District Court to recalculate
the "loss" sustained by GWB in light of this court' s decision
in United States v. Sharma, 190 F.3d 220 (3d Cir. 1999). In
recalculating the fraud loss amount on remand, the District
Court found no reason to rely on the appraisal value, given
that an appraisal is simply an estimate. Instead, the
District Court determined that GWB' s subsequent sale of
the property one month following its purchase to EMC
Mortgage Company ("EMC") for $307,500 was a more
reliable indication of the property' s fair market value. The
District Court also included unpaid interest lost to GWB,
although the government had not argued this issue at the
original sentencing hearing. The new fraud loss amount
resulted in an increased offense level of seventeen and
sentencing range between thirty and thirty-seven months
imprisonment. Because the court was reluctant to increase
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Napier' s already completed sentence, it reimposed the
original sentence. Napier has completed serving his prison
sentence and is currently serving the supervised release
portion of his sentence. He filed a timely appeal from the
District Court' s reimposition of his sentence. He seeks a
ruling that GWB sustained no loss in order to reduce the
amount of restitution he has been ordered to pay to GWB' s
successor, and he seeks a ruling that he served an
unlawfully long prison sentence so that he can persuade
the District Court to reduce his term of supervised release.
II.
Whether the District Court Erred in Using the Market
Value of Napier' s Property Instead of the Appraisal Value
in Recalculating the Fraud Loss Amount.
The appropriate standard of review of a district court' s
decision regarding the interpretation of the Sentencing
Guidelines, including what constitutes "loss," is plenary.
Sharma, 190 F.3d at 226. Factual findings, however, are
simply reviewed for clear error. Id. at 229. Because the
District Court' s refusal to grant credit for the appraisal
value based on the existence of a more reliable value is
essentially a fact-based determination, we should review for
clear error. Id. (finding that the district court' s decision to
deny credit was entitled to deference).
Napier asserts that this court' s opinion and judgment
deciding his prior appeal ordered the District Court to re-
sentence him using the appraisal value to calculate loss in
accordance with Sharma. In Napier' s prior appeal, we
ordered: "In Sharma, we held that failure to use the
appraisal value was an error . . . . Thus, we believe it is
appropriate to remand this matter for reconsideration in
light of Sharma." App. at 177a-78a. Napier misconstrues
our mandate, which was to reconsider Napier' s case in light
of Sharma. We did not direct the district court to
recalculate the fraud loss amount using the appraisal
value. What we stated was: " The government . . .
recommends that we remand since the District Court did
not have the benefit of Sharma when it sentenced Napier.
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We agree." Id. If we had intended simply that the appraisal
value be substituted for the forced sale price, it would not
have been necessary to remand. Instead, the remand
allowed the district court to reconsider this issue in light of
Sharma. Thus, we reject Napier' s argument that the District
Court here ignored or thwarted our mandate.
We turn therefore to our opinion in Sharma. In that case,
we held that the district court improperly credited Sharma
only $40,000 for property that had been appraised at
$80,000. 190 F.3d at 229. In reversing, we reasoned that
because the bank eventually was successful in its suit to
obtain the parcel of land, Sharma was entitled to a credit
for the full value of the land less the bank' s expenses in the
litigation to acquire title. Id. In this case, the District Court
found Sharma did not "stand for the proposition that an
appraisal value should always be used in preference to
other, perhaps more reliable, valuations of property." United
States v. Napier, No. 97-214, 2001 WL 33569, at *2 (E. D.
Pa. Jan. 11, 2001). It is not disputed that Napier is entitled
to the full value of the property; the issue instead is what
is the most reliable value of the property.
Napier argues that the appraisal value of the property at
$480,000 is the most reliable valuation of the property. The
District Court found the $307,500 valuation to be most
reliable as it "represents the result of an arm' s length
transaction between sophisticated parties." Napier, 2001
WL 33569, at *2. It reasoned: "Such valuations of property,
if available, should be used in preference to appraisals,
which are, by definition, merely estimates of what property
will cost in an arm' s length transaction." Id.
Napier argues, however, that despite the District Court' s
assertions that GWB' s subsequent sale of the property to a
third party was "an arm' s length transaction between
sophisticated parties, " the District Court record is devoid of
evidence that any subsequent purchaser was a true arm' s
length purchaser who paid fair market value. The
government bears the burden to prove by a preponderance
of the evidence the facts in support of a sentence
enhancement. United States v. Evans, 155 F. 3d 245, 253
(3d Cir. 1998). Napier argues that the information on
subsequent sale prices that the government presented to
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the District Court on remand was supplied by letter to the
judge' s chambers rather than by a filing with the clerk' s
office and is not included in the record on appeal. However,
he does not dispute that GWB purchased the property in
1995 at a sheriff ' s sale for $305,000 and sold the property
to EMC one month later for $307, 500, although he
questions whether the subsequent sale to a commercial
seller of real estate was an arm' s length transaction. The
District Court was satisfied that the market had declined in
the period following the appraisal, as the purchaser to
whom the bank had sold the property then resold it a few
years later for approximately the same price. Admittedly,
there does not seem to be much evidence on the record as
to value, but the government proved to the District Court' s
satisfaction that the $307,500 value was more reliable than
the appraised value determined more than five years prior
to the discovery of the fraud. We have no basis to hold that
the District Court' s decision was clearly erroneous.
Whether the District Court Improperly Included Unpaid
Interest in Calculating "Loss, " Considering the
Government Failed to Raise this Issue at the Original
Sentencing Hearing.
Napier argues that because the government failed to seek
the inclusion of unpaid interest at the original sentencing
hearing, it is barred from attempting such an argument on
remand. The United States Sentencing Guidelines section
2F1. 1 comment 8 provides that loss "does not . . . include
interest the victim could have earned on such funds had
the offense not occurred. " In Sharma, we held that this
exclusion of interest from the calculation of loss applied to
"opportunity cost," the interest a bank could have earned
had it not made the loan in question, but that "bargained-
for interest," interest for which the debtor has bargained
and is contractually obligated to pay the bank, should be
included. Sharma, 190 F.3d at 227-28. The District Court
applied Sharma in including the bargained-for interest in
the calculation of loss, rejecting Napier' s objection that the
government failed to raise this issue at the original
sentencing hearing.
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Napier' s argument is consistent with our precedent that
the government should not be allowed to take a "second
bite at the apple." United States v. Dickler , 64 F. 3d 818,
832 (3d Cir. 1995). In Dickler, we held:"[W]here the
government has the burden of production and persuasion
as it does on issues like enhancement of the offense level
under § 2F1.l based on the victim' s loss, its case should
ordinarily have to stand or fall on the record it makes the
first time around." Id. See also United States v. Leonzo, 50
F. 3d 1086, 1088 (D.C. Cir. 1995) (remanding for re-
sentencing on the existing record where government failed
to sustain its burden of proving loss under § 2F1.1); United
States v. Parker, 30 F. 3d 542, 553-54 (4th Cir. 1994) (no
new evidence permitted on re-sentencing where prosecution
had failed to introduce sufficient evidence that offense took
place within 1000 feet of a "playground" within the meaning
of the statute).
In response, the government argues that we need not
reach that issue because neither Napier' s sentence nor the
amount of restitution following the remand was affected.
Careful examination shows the government is correct.
The District Court in the initial sentencing found that the
fraud loss amount was $144, 183, using the $305,000
property value. Consequently, Napier was sentenced to 30
months in prison, five years supervised release, and
ordered to pay restitution totaling $16,000. When the
District Court included the "bargained-for" interest in
calculating the fraud loss amount on remand it raised that
amount to $272,130. However, the District Court did not
impose a harsher sentence on Napier due to the increased
fraud loss amount. Instead it imposed the same sentence
as was imposed at the initial proceeding, including the
same amount of restitution Napier was ordered to pay. The
fraud loss amount using the $307, 500 property value but
excluding the "bargained-for interest" is $141,683.
Therefore, even if the District Court on remand had not
included the bargained-for interest, the fraud loss amount
would have placed Napier in the same enhancement level
as the initial sentence. Napier does not argue that the
$2,500 difference between the amount the District Court
initially calculated to be the fraud loss and the amount
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yielded by the calculation of loss were the interest excluded
and the property value of $307,500 used affected the
amount of restitution he was ordered to pay.
Whether GWB Sustained a Loss for Purposes of the
Sentencing Guidelines Where Pennsylvania State Law
Provides an Irrebutable Presumption It Has Been Paid in
Full.
Only if Napier succeeds on his contention that GWB
sustained no loss will he prevail on appeal. He argues that
since GWB failed to file a petition to fix the fair market
value six months after the forced sale of the property, it is
conclusively presumed to have recovered in full the balance
due on the property, including interest, fees, and costs,
pursuant to Pennsylvania's Deficiency Judgment Act.
Pennsylvania' s Deficiency Judgment Act provides:
Whenever any real property is sold, directly or
indirectly, to the judgment creditor in execution
proceedings and the price for which such property has
been sold is not sufficient to satisfy the amount of the
judgment, interest and costs and the judgment creditor
seeks to collect the balance due on said judgment,
interest and costs, the judgment creditor shall petition
the court to fix the fair market value of the real
property sold.
42 Pa. Cons. Stat. Ann. § 8103(a). Section 8103(d) further
provides that a judgment creditor' s failure to file a petition
to fix the fair market value of the property acquired within
six months after receiving title creates an irrebuttable
presumption that the creditor was paid in full.
The District Court held that "[a]lthough Napier offers a
creative argument, he fails to explain why this state law
should control the determination of loss in a federal
criminal action." Napier, 2000 WL 33569, at *2 n.5. We
agree. Napier fails to offer any persuasive evidence as to
why this court should apply a state civil statute in
determining the amount of GWB' s sustained loss under a
federal criminal statute.
U.S.S.G. § 2F1.1 comment 8(b) provides that the "loss [at
issue] is the actual loss to the victim." Actual loss is read
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as the loss the victim has actually sustained or expects to
sustain, not presumptions of loss created by state law. We
will affirm the District Court' s decision not to apply
Pennsylvania state law to section 2F1.1 of the Sentencing
Guidelines.
For the reasons set forth, we will affirm the District
Court' s judgment of sentence.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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